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Why are DOTr and Transco competing with the private sector?

Ed JavierHas the “contractor mentality” syndrome overcome certain quarters in the Administration? Has the syndrome driven government to ease out key private sector participants in infrastructure development? 

These are the questions being asked in business circles these days in the wake of certain baffling moves taken by some government officials recently.

Many are wondering if these moves are a signal that government is no longer keen on encouraging private sector participation in the development of vital infrastructure, or if some officials are simply interested in playing the contractor game.

A case in point is the recent announcement by Transportation Secretary Arthur Tugade that the government will no longer bid out the project for the redevelopment of the Clark International Airport. He said the government itself – through his department, of course – will instead “handle it ourselves”.

This is a complete turnaround from an announcement he made just eight months ago at a business forum. The reason he gave for this puzzling turnaround was even more baffling. Tugade said he is afraid that too many private sector entities might become interested to undertake the project.

Since when did private sector enthusiasm to take part in the development of the country become a problem, Mr. Secretary?

All the while, we thought that it was government’s goal to get private sector to pour in money into the development of infrastructure. The reason : private sector does it faster and better, with less corruption to boot.

This is the same signal that has been sent to the private sector in the aftermath of a baffling move on the part of a newly-appointed government official to stop a private sector partner from performing an obligation under a valid concession agreement.

Two weeks ago, we echoed the sentiment of the business sector regarding an announcement made by former airport officer-in-charge Melvin Matibag who was recently named head of the National Transmission Corporation (Transco).

This has to do with a P52 billion project which calls for the installation of an additional 214 kilometers of the combination of high-tension wires strung on giant transmission towers and submarine cables from Zamboanga del Sur to Cebu province.

The business sector has long seen this project as urgent. They believe that this is what will save Mindanao from the recurring problem of power shortage.

Under an existing concession agreement, the private sector-led National Grid Corporation of the Philippines (NGCP) is tasked to build that interconnection.

That may not happen, though. Matibag, a protege of Energy Secretary Alfonso Cusi, has announced that he wants Transco – the government arm – to build that interconnection instead. Two other statements by Matibag rang alarm bells: first, that he plans to use the Malampaya Funds to build that interconnection; second, that he will “review” the concession agreement between the government and NGCP.

The “review” is what was most disconcerting. As we said, when the government “reviews” a deal, it is a signal that it may be planning to get out of a valid business covenant, or it simply wants a private sector partner to give in to certain demands.

Whether or not that was the intention, Matibag may have sent those powerful signals to the business sector.

We can only commiserate with Matibag. As we mentioned, industry observers smell something fishy here and Matibag may have been placed in a situation he may not want to be in. Now, his entry into Transco is being viewed as merely part of a scheme to torpedo the interconnection plan that has already been put in place by NGCP.

Matibag was recently quoted as saying that he is now resurrecting shelved feasibility studies that have been prepared by Transco prior to its privatization.

The new Transco head said he believes that the studies would show that the interconnection can be built at costs lower than what has been proposed by NGCP.

Again, this has made many eyebrows frown.

The view is that those studies may no longer reflect current costs. It may present cheaper costs on paper that may have to be significantly modified once the project begins to roll and comes face to face with the realities of inflation and price escalation.

We hope that these moves by the transportation and energy sectors are not interconnected, pardon the pun.

Otherwise, they may signal a shift in government policy and directions. They may convey the negative message that the government is no longer interested in the participation of the private sector in the bid to speed up the development of the country’s vital infrastructure.

Tugade’s and Matibag’s statements convey a certain distrust in the capability and sincerity of the country’s business community.

That could damage a partnership that has transformed many sectors in the country.

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